Goldman Contemplates Bonus Options
Due to massive public outrage over the Wall Street firm’s huge bonuses, board member George William said the firm is possibly looking at paying their executives much less this year, and from now on.
“I think that’s up to the compensation committee to decide, but I think they are going to take a very hard look at it,” Mr. William said in an interview on Bloomberg Television. “There is so much anger out there and I’m not quite sure how to ameliorate that, other than to moderate things and to recognize that Goldman and every other firm benefited from the actions of the Federal Reserve Board and the Treasury Department.”
The firm had set aside 47% of revenue’s aside solely for employee compensation and benefits, which roughly comes out to around $500,000 per employee for their 9 months of work.
Treasury Secretary Timothy Geithner is calling for an end to “irresponsibly high bonuses” on Wall Street. He also claims that Goldman could have done without the help from the TARP program set up to help small business (mainly) get through the financial crisis. With the help of TARP, the firm received $10billion, which they fully repaid in June, plus interest.
In regards to compensation ratios, Goldman Sachs’s CFO Viniar told analysts on a conference call in March of 2008 that “compensation is two-thirds of our expenses and year-end bonuses are two- thirds of our compensation.” Mr.Viniar thinks the best thing to do is to tie the payout amounts to performance over the long term. He also added that incentive payments should be made in restricted stock with a maturity of 5 years, for example.
He also added: “It’s clearly a sensitive matter, and I think the amount is a sensitive matter, I don’t think at any level the public can feel satisfied with it.”